- Mixed signals from Bank of Japan policy makers last week, along with the underlying bullish sentiment around the equity markets, continue to act as a headwind for the safe-haven Japanese Yen.
- BoJ board member Hajime Takata said last week that the central bank must consider overhauling its ultra-loose monetary policy as the achievement of the 2% inflation target is becoming in sight.
- BoJ Governor Kazuo Ueda, however, said it was too early to conclude that inflation was close to sustainably meeting the 2% target and stressed the need to scrutinize more data on the wage outlook.
- Furthermore, a recession in Japan, along with a slightly warmer domestic consumer inflation, adds to the uncertainty about the BoJ's future policy decisions and keeps the JPY traders on the sidelines.
- Media reports, citing sources, suggest that the Japanese government has begun considering declaring an official end to deflation two decades after it acknowledged that prices were falling moderately
- The US Dollar is undermined by Friday's disappointing ISM Manufacturing PMI, which contracted more than anticipated and came in at 47.8 for February as compared to 49.1 in the previous month.
- Other details of the report showed that the Employment Index declined to 45.9 from 47.1, the New Orders Index retreated to 49.2 from 52.5 and the Prices Paid Index edged lower to 52.5 from 52.9.
- Adding to this, the University of Michigan’s Consumer Sentiment Index also fell short of estimates and dipped to 76.9 in February, though inflation expectations were in line with the expectations.
- Fed Governor Adriana Kugler noted that progress on disinflation will continue, while Richmond Fed President Thomas Barkin said that overall inflation is likely to come down over the next few months.
- Chicago Federal Reserve President Austan Goolsbee said that the policy rate is quite restrictive, and Dallas Fed President Lorie Logan said that it will be appropriate to slow the pace of the balance sheet shrinking.
- The US Treasury bond yields declined on Friday after Fed Governor Christopher Waller’s comments, saying that he would like the central bank to boost its share of short-term Treasuries.
- Investors now look forward to the release of the Tokyo CPI report on Tuesday for a fresh impetus, ahead of the month start key US macro data, including the crucial Nonfarm Payrolls on Friday
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